COA holds Fraternal Order of Police Associates and Olympia Entertainment are not liable for homicides after serving alcohol to murderer

The Michigan Court of Appeals in the consolidated cases of Auto Owners Insurance Co. v Olympia Entertainment Inc., No. 315891 and Seils v Fraternal Order of Police Associates, Nos. 315901 & 316511, held that (i) an exclusion in an insurance policy for a company engaging in the business of alcohol did not apply to the Fraternal Order of Police Associates (“FOPA”) as the organization did not engage in alcohol sales on a continuous, ongoing basis; (ii) serving alcohol to an intoxicated individual is not the proximate cause of that individual committing a violent intentional act; (iii) the Michigan Dramshop Act does not permit a claim for vicarious liability to an entity that does not hold the liquor license; and (iv) a courtesy copy of a notice sent to another party is not sufficient for notice under the Dramshop Act.

FOPA was granted a special liquor license by the State of Michigan to operate a beer tent at the Detroit Hoedown in 2010, while Olympia assumed the role of recruiting, training, and supervising all of the civic groups that were operating at the event. In its role, Olympia required FOPA to provide proof of several types of insurance policies before operating at the event. FOPA complied and provided the required insurance policies to Olympia. The policy at issue contained an exclusion stating that Auto Owners Insurance Co. (“Auto Owners”) was not liable for any damages caused by FOPA if it is in the business of selling, serving, or furnishing alcohol.

On May 15 2010, the date of the Hoedown, three individuals, James Pagano, Todd Pink, and Carrie Seils, purchased alcohol from FOPA and Pink, who had already been drinking, became heavily intoxicated and disruptive. The other two individuals decided it was best to leave, and the three drove home, at which time an argument erupted between them. The argument culminated with Pink killing Carrie and one of her daughters, shooting Pagano, and wounding another of Carrie’s daughters with a large fork and knife.

The father of the decedent daughter and ex-husband to Carrie sued FOPA for serving alcohol to an intoxicated person in violation of the Dramshop Act and sued Olympia on a theory of vicarious liability. Auto Owners then refused to indemnify FOPA because of the alcohol business exclusion in the insurance contract.

The Court first determined that the exclusion did not apply because FOPA was not in the business of selling alcohol. It reasoned, using the dictionary and precedent from other jurisdictions, that an entity is in the business of serving alcohol when it “engage[s] in alcohol sales on a continuous, ongoing basis,” here FOPA was only selling alcohol at this one event, and the purpose of the sales was to raise money, not to engage in the business of selling alcohol. Thus, the Court held that the exclusion did not apply, and the policy was to be enforced against Auto Owners.

The Court next determined there was not a sufficient link to establish proximate cause between the violations of the Dram Shop act and this violent crime. The Court reasoned that there was no evidence to demonstrate FOPA was on notice that serving alcohol to an intoxicated individual would lead to violent premeditated murder. Thus, proximate cause could not be established.

The Court then considered whether Olympia could be vicariously liable for FOPA serving alcohol to an intoxicated person under the Dramshop Act and held it could not. The Court articulated that under the Dramshop Act, the only vicarious liability that exists is when the liability “flows upward” to the licensee. For example, when a clerk, agent, or servant of a licensee serves alcohol to an intoxicated person, the licensee can be held liable. However, here the licensee was the party that faced liability; there is no vicarious liability to a non-licensee such as Olympia which was merely the organizer of the civic groups.

Lastly, the Court determined that when the father of the decedent daughter and ex-husband to Carrie, sent notice to FOPA regarding its intention to file a lawsuit under the Dramshop Act, sending Olympia a courtesy copy of this notice was insufficient under the Act. Rather, the Court determined, Olympia was required to receive notice directed to it, and because it did not, the notice was insufficient.

Thus, the Court found in favor of Olympia and FOPA and permitted those parties to tax costs to the Plaintiffs.